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emption of the owner of an establishment from responsibility for infringement by coin-operated phonograph players, of which he is not the operator, but which are located in his establishment.

We, therefore, recommend for committee consideration, as being in the interest of justice, the following:

The proprietor of an establishment in which a nondramatic musical work is performed by or under the exclusive direction of an independent contractor, not an employee of the proprietor, is not liable for infringement with respect to such public performance.

We note that the term of copyrights would be extended and that the penalties for infringement have been increased by the proposed legislation. At the same time, however, some relief is given the innocent infringer by section 504 (c) whereby if he sustains the burden of proving and the court finds that he was not aware and had no reason to believe his acts constituted an infringement, the court may reduce the aware of statutory damages to a sum of not less than $100. We deem this reduction in the minimum from $250 to $100 to be a proper mitigation in the usual case where, for instance, an operator may have a house band, the members of which would be his employees, and they infringe without the operator's knowledge. The doctrine of respondent superior would make him liable for the infringement, but since he had no wrongful intent, the penalty should be reduced.

In summary, we feel the recognition given in the bill to the awkward position of the innocent infringer by the reduction of the minimum statutory damage award, is a movement in the right and just direction. Particularly in this day of superabundance of new musical compositions Congress must be sensitive to the hardships which can be imposed on the unintentional infringer.

We deem it to be most important in this regard, that the area of liability be narrowed to include only those actually responsible for an infringement, and those who are responsible for those who actually and really perform the infringing work. While the definition of "perform" may well accomplish this beneficial result, we believe the committee would be acting in the public welfare to clarify this result by proposing the amendment hereby suggested to you.

I am deeply grateful for the opportunity to appear here today to state the existence of a problem of an industry which the committee might well have overlooked, in its deliberations on this bill. You will in all probability hear nothing further about it from the ballroom operators. We ask, however, that you do give careful consideration to this proposed amendment. We feel it is fair, and that this alone will commend it to you.

Thank you.

Senator BURDICK. Thank you very much. I believe we understand your problem.

We will be in recess until 10 o'clock tomorrow morning.

(Whereupon, at 4 p.m., the committee was recessed, to reconvene at 10 a.m., Tuesday, March 21, 1967.)

COPYRIGHT LAW REVISION

TUESDAY, MARCH 21, 1967

U.S. SENATE,

SUBCOMMITTEE ON PATENTS,

TRADEMARKS, AND COPYRIGHTS OF THE

COMMITTEE ON THE JUDICIARY,

Washington D.C. The subcommittee met, pursuant to recess, at 10:05 a.m., in room 3302, New Senate Office Building, Senator Quentin Burdick presiding. Present: Senators Burdick (presiding), McClellan (chairman of the subcommittee), and Scott.

Also present: Thomas C. Brennan, chief counsel; Edd N. Williams, Jr., assistant counsel; Stephen G. Haaser, chief clerk, Subcommittee on Patents, Trademarks, and Copyrights; George S. Green, professional staff member, full committee; and Horace L. Flurry, representing Senator Philip A. Hart.

Senator BURDICK. Come to order, please.

The first witness this morning will be Mr. Thurman Arnold, special counsel for the Record Industry Association of America.

STATEMENTS OF THURMAN ARNOLD, SPECIAL COUNSEL, RECORD INDUSTRY ASSOCIATION OF AMERICA, INC.; ALAN LIVINGSTON, PRESIDENT, CAPITOL RECORDS; SIDNEY DIAMOND, COUNSEL, LONDON RECORDS, AND MEMBER, LEGAL COMMITTEE OF RIAA; CLIVE DAVIS, VICE PRESIDENT AND GENERAL MANAGER, CBS RECORDS; DAVID KAPP, PRESIDENT, KAPP RECORDS; AND ISABEL MARKS, COUNSEL, DECCA RECORDS

Mr. ARNOLD. Mr. Chairman, I am Thurman Arnold, special counsel to the Record Industry Association of America. RIAA appears before this committee for two main purposes. First, to protest the sharp and unjustified increases in the statutory license rates, proposed in section 115 of S. 597, which the record industry must pay to music publishers in order to manufacture phonograph records. Second, to give the united support of the association to amendment 131 to S. 597 introduced by Senator Harrison Williams of New Jersey. Senator Williams' bill amends section 115 of S. 597 by reducing the statutory license fee to its former rate of 2 cents. In addition, it proposes to grant the same performance rights in sound recording which are given to all other copyright holders. There are also additional amendments contained in the bill which the record industry supports.

I will first discuss the issue of the increase of the compulsory license. Thereafter, Mr. Alan Livingston, president of Capitol Records,

will concentrate his testimony on the need for the record industry to have public performance rights in phonograph records for their benefit and for the benefit of the performers. Mr. Sidney Diamond, counsel for London Records and a member of the legal committee of RIAA, will summarize the features of the performance rights amendments which the RIAA urges the committee to accept. Mr. Clive Davis, vice president and general manager of CBS Records, will discuss in particular the critical damage the proposed rate increase will wreak on classical music. Mr. David Kapp, president of Kapp Records, will emphasize the impact of the rate increase on a small company. Isabel Marks, counsel, Decca Records, will underscore the inequity of basing the statutory licensing rate on all records manufactured, rather than upon records "made and distributed." Jarrell McCracken, president of Word, Inc., will relate the effect of the increase on his small record company. Finally, Mr. Ernest Meyers, the general counsel of RIAA, will summarize the industry's position on S. 597 and the proposed amendments to it, with particular attention to the proposed amendment to section 303.

THE 25-PERCENT INCREASE IN THE STATUTORY LICENSE RATE

The phonograph record manufacturers were surprised and bitterly disappointed by the provisions of the copyright bill approved last session by the House committee, which formed the basis for S. 597, and which will increase by 25 percent a record manufacturer's costs in securing from a music publisher a license for the melody line of a popular song. It also raised the cost of statutory licenses for classical music by 100 percent.

There is no justification whasoever in the record for these increases. The evidence in the House hearings on the inequities of the proposed rate increase is an exhaustive study and analysis of the record industry which reflects, in great detail, the profits, costs, and return on investment of the record industry. This objective study was prepared by John Desmond Glover and David Frederick Hawkins, members of the faculty of Harvard University Graduate School of Business Administration, assisted by the Cambridge Research Institute of Cambridge, Mass. Members of the Harvard University faculty were selected by RIAA rather than professional economic advisers because their independent positions in the academic world was a guarantee that their study would be objective and not subject to the pressures of their client. Dr. Glover's report and testimony occupies 152 pages of the House hearings (pp. 771-923). It covers a period through 1964, the latest date possible to prepare the report prior to the hearings before the House committee.

I shall summarize the basic economic conclusions which emerge from Dr. Glover's study. I feel confident that if the committee examines the supporting detail in Dr. Glover's testimony before the House, it will find these conclusions conclusively supported.

Dr. Glover's study established the following facts:

(1) There can be no question as to the value of the creative contribution which the record industry makes to sound recordings.

The music publishers would have you believe that a record manufacturer stamps out phonograph records like a pretzel baker and then, like the unbiquitous baker, he simply bakes and makes the dough. Here is a piece of music as it comes from the composer-this is called a lead sheet. You have the lead sheet on your desk.

(The lead sheet referred to follows:)

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